Managing Bandwidth Costs

By Tammy Mastroberte, Contributing Editor
| April 08, 2014

When it comes to accessing the Internet, today’s consumers expect to connect wherever they go — whether it’s a restaurant, hotel, airport or shopping mall. But as technology continues to evolve, it’s not uncommon for people to carry more than one device, which requires more bandwidth equating to more expense for hotel operators striving to meet guest demands.

“A lot of us still have laptops, but we also now have smartphones, and carrying three devices when traveling is common today,” says Josh Weiss, vice president of brands and guest technology at Hilton Worldwide (www.hiltonworldwide.com), based in McLean, Va., and operating more than 4,100 properties. “In 2014, 80 percent of hotel guests will have a tablet with them, and this didn’t even exist before 2010.”

Not only do multiple devices place more demand on a hotel for high-speed Internet access (HSIA), but also with devices changing so rapidly, it’s hard to predict what will be needed next or how much bandwidth will be necessary to avoid interrupting the guests’ experience.

“There is nothing more frustrating than getting a free connection, and it’s no good,” says Trevor Warner, president of Warner Consulting Group (www.war
nerconsultinggroup.com) in Columbus, Ohio. “The issue for hotels is how do they provide what is essentially plug-and-play capability for guests while their devices are constantly changing. And many are carrying up to five devices now.”

The more devices, the bigger the demand on a hotel’s network, which often leads to frequent upgrades, and demand isn’t slowing down any time soon. At Sheraton Imperial Hotel and Conference Center (www.sheraton.com) in Raleigh-Durham, N.C., the 300-room hotel recently upgraded its guest bandwidth from Time Warner (www.timewarnercable.com) to 50 MB per second at the end of 2013, and already sees the need to upgrade to 100 MB within the next six months, says Michael Martino, general manager of the property.
“People today travel with a laptop, iPad, cell phone and a Nook, and it’s not uncommon for them to fire up any and all devices during their stays,” he explains. “Also, streaming movies has become more popular than ever.”
While the technology available is not new, many network providers are building out farther to reach more businesses, and there are more options in fiber and fixed wireless, says Warner. Fiber offers scalability up to 2 GB with better uptime, but it’s not available
everywhere.

“Verizon (www.verizon.com) will not install copper anymore. They are only installing fiber, so there is a huge shift happening,” he notes. “But you can’t get fiber everywhere. It depends on how many providers are in the town and if they have fiber built out to the area of the hotel.”

Revenue from Tiered Pricing
While the cost per megabyte of bandwidth is going down, the need for more continues to increase, and although many hotels take on this expense as part of operations, more and more are beginning to add premium options as a revenue stream to make HSIA more affordable.

At all Hilton properties, working with partners including Cisco (www.cisco.com), AT&T (www.att.com) and Motorola (www.motorola.com), Wi-Fi is free in the lobby, and to Hilton Honors Gold or Diamond members in the hotel rooms. Fees vary per brand, but the company is in the midst of rolling out a new tiered pricing program for its focused service brands this year, including Hampton Inn, Homewood Suites, Hilton Garden Inn and Home2 Suites — which by number constitutes more than any other brands in the chain.

“The Internet is much more standardized, and we will still be offering it free to guests, but are introducing a premium tier where guests will pay a fee for more bandwidth,” says Weiss.

This decision was made because many guests were asking for the ability to access more bandwidth, stating they would be willing to pay a small fee for it, but also because the cost of bandwidth is continually increasing with upgrades, he notes.

“The purpose of the program is that guests were asking for it, and the cost of upgrading is not going away for us, so it’s a partial offset of keeping bandwidth that is up-to-date,” Weiss explains. “It’s not like electrical and plumbing where it needs maintenance, but we don’t need to put pipes twice as large as the previous that are only five years old.”

At the Sheraton Imperial, the property does not charge hotel guests for Internet in the rooms or public spaces because other hotels in the area do not, and there was a need to remain competitive. However, the hotel does charge a fee for accessing Internet in the meeting space.

“For some of the larger conferences where bandwidth is an important part of the conference, it is a revenue stream opportunity,” says Martino. “We could go a month with no demand and then two months with heavy demand. But we are the only hotel in a 10-mile radius that offers that kind of convention space.”

Monitoring supply and demand
Bandwidth demand can vary day by day and depends on several factors, including: how many guests are staying at a hotel, how many devices they are carrying, and if a hotel is hosting a conference. As a result, it’s important to monitor bandwidth usage continually to make sure guests’ expectations are being met, and to know ahead of time when upgrades will be needed.
“In monitoring demand on a daily basis, you can see the trends, and as more and more technology is being carried by travelers, it is going to continue to be a requirement,” says Martino. “Hotels are going to have to build that into their model.”

Also, when monitoring usage, it’s easier to spot where a hotel may be overspending on bandwidth. When building a new property, the recommendation might be 100 MB of bandwidth per second, but depending on the size and guest population, this could be too much.

“Everybody buys a 100 MB circuit because they think they need it, and then we will pull reports showing they are only using 20 MB,” says Warner. “They are throwing away money. Hotels need to pull utilization reports to see the growth in usage. Then they will know when it’s time to upgrade, which is usually when 90 percent of the total amount of bandwidth they have is being used. Then it’s time to increase.”

At Hilton, all hotels have a Web-based tool built by AT&T delivered through the Hilton Internet Portal so management can monitor every aspect of usage at the hotel. If they exceed a set threshold, they will be alerted, and if it continues, then an upgrade of bandwidth is considered, Weiss says.

“We want all of this to happen before it starts coming up in a guest comment or complaint,” he says. “We set the thresholds so it’s not at maximum capacity, and we will get an alert when approaching that level, which is before it would interrupt a guest.”